Monday, December 03, 2012

Why Taxes Will Be Raised

A business reporter for a Hartford newspaper writes in an above
the fold, front page story,
“In An Era of Fiscal Crisis, Malloy Has Few Places To Run,” that “Malloy's
budget chief issued a firm statement in writing: ‘The Governor will NOT propose
tax increases as a solution to these challenges.’"

The “challenges” are a budget deficit in Governor Dannel
Malloy’s first budget of $362 million, a figure that will escalate in coming
weeks, and a future projected deficit of $960 million per year in each of the next
three years. Connecticut’s total state debt
– including pension fund debt of $60 billion and $20 billion in bonded debt –
is the third highest debt per capita in the United States and represents about 40
percent of the state’s Gross Domestic Product (GDP).

The business reporter – and, indeed, most reporters in the
state – was much impressed that Mr. Malloy’s budget hawk, Office of Policy Management
chief Ben Barnes, had put the governor’s pledge in writing. And of course that imposing
“NOT” in such visible caps strongly suggests Mr. Malloy’s strenuous aversion to
tax increases. And yet, though reporters in the state now have in hand a
WRITTEN pledge that the governor will NOT propose tax increases, many political
watchers are riven with doubts.

If taxes are not increased, they reason, how will Mr. Malloy
discharge such a large and imposing deficit?

None of the conditions to which Mr. Malloy has attributed
the state’s metastasizing deficit – larger Medicaid payments, the continuing evisceration
of the nation’s economy, the near certainty that all of Europe, with the
possible exception of Germany, has entered a double dip recession – will change
substantially within the next fiscal year. It took Connecticut a full ten years to
recover the jobs lost in the preceding soft recession beginning in the early
1990’s; and the current recession – marked by increased government spending,
higher taxes levied on entrepreneurial investment and the Dodd-Frank regulatory
Octopussy – is certain to last longer.

In addition, Mr. Malloy seriously hobbled himself when he
made in his first budget an offer to state union workers they could not refuse.
In return for dubious saving, Mr. Malloy offered SEBAC, a union coalition
authorized to negotiate contracts with the governor, salary raises of three
percent each year nine years out, a deal
characterized by retiring State Senator Edith Prague as one that unions would be nuts to reject. When the unions accepted the deal, they removed an important
tool from the governor’s tool box. At this point, Mr. Malloy can only realize
significant cost savings from state workers by abrogating contracts – not likely.

Such a move would require co-operation from a General
Assembly dominated by progressive Democrats.

Would the “firm statement” issued by Mr. Barnes on Mr. Malloy’s
behalf have presented a less firm commitment to spending reductions had Mr.
Barnes chosen to emphasize a different word in Mr. Malloy’s categorical
imperative: “The Governor will not PROPOSE tax increases as a solution to these
challenges."

This rendering leaves open the possibility that progressive
Democrats in the General Assembly, having rejected Mr. Malloy’s no-tax-increase
intention for the upcoming special session called to liquidate the last fiscal
year’s budget deficit, will then PROPOSE at some point tax increases designed
to discharge an accumulative deficit of some $3 billion, give or take a few hundred
millions, in the new fiscal year.

It has been said that Mr. Malloy will need Republican
cooperation in the special session to enact savings that accomplish his intention –
to discharge last fiscal year’s deficit without raising taxes. The governor’s
intention with respect to the new fiscal year’s budget, which carries a much
larger deficit, is usefully ambiguous.

Republicans in the General Assembly no doubt will recall they
were unceremoniously stiffed in the earlier session that now has given birth to
a $362 million deficit. Mr. Malloy did not need Republican good will to arrange
his deficit producing first budget, which included the largest tax increase in Connecticut
history, and Democrats were on the whole delighted to see Republicans playing
the fool. Nor will the governor need Republican support in the creation of his
second fiscal year budget, which may entail similar Potemkin Village savings
and yet another massive tax increase. Republican leaders in the General
Assembly should prepare now for the possible stiffing – before they negotiate
with the governor to liquidate in special session the Democrat’s first imbalanced
deficit ridden budget.

To do otherwise would be to play the fool most progressives
in the dominant Democratic Party believe Republicans to be: Fool me once, shame
on you; fool me twice, shame on me. There are some happy signs that voters, already
stung by massive tax increases, will not during the next elections be inclined
to suffer fools gladly.

1 comment:

There are some happy signs--------------------------Hard for me to see them, though.

It seems the electorate here is sincerely oblivious of the State's fiscal peril. Will it wake up, stop rewarding pols for reckless spending, start punishing their tax hiking? I wish I were optimistic.

What's truly astonishing to see, both down in D.C. and here in the Nutmeg State, is the apparent sincerity of the lefty pols in denying that their policies are in themselves catastrophically destructive, not to mention just dumb. What is a smart guy like Malloy doing raising taxes big time, and then promoting an idiotic busway or handing out tax bucks to hedgefunds? These Dem hacks know they'll be re-elected in any case, why can't they exercise an ounce of judgement?